Jet Advisors Blog

The old saying 'if it sounds too good to be true, it probably is' holds true in most instances. It can be especially costly to you in the field of aviation if you fly charter, use a fractional service or have a whole aircraft or share a whole aircraft.

Aircraft are rather unique vehicles for travel in that most others wear out and get retired, but with an aircraft, as long as they are inspected and maintained to their manufacturer’s and the governmental agency that oversees them requirements they don’t wear out, to a point. This is one area to be concerned with if you are looking to buy a whole aircraft or share a whole aircraft with partners. Older aircraft have lower acquisition costs as compared to newer like aircraft but as aircraft age the maintenance and inspections become progressively more intensive. So you pay less upfront but the costs to keep the aircraft airworthy are higher, much higher than a newer aircraft. Also with whole aircraft ownership your travel patterns can cost you more. If you fly somewhere and stay, do you ferry the aircraft back empty to its base or do you keep it with you. If you keep it with you what do you do with your crew? Do you pay for them to fly home or do you pay their hotel, meal and rental car costs while they stay. Keeping the aircraft with you may not be an option if you share the ownership with others.

If you share the aircraft with others, who gets first priority for its use? If you are second inline do you not travel or do you have to find alternative means at your expense? Keeping in mind even when you are not using your aircraft you still incur expenses for its upkeep, hangar, crew, insurance, etc. If you have lease financed the aircraft you own or share, what are the aircraft condition requirements (cosmetically and mechanically) at end of the lease term? These can be substantial.

With fractional programs and charter operators what is your real cost? Like todays pricing for airline travel there can be many “hidden” costs. When a fractional company provides a proposal to enter their program do they include the depreciation on your aircraft asset (50% or more over a five year term), fuel adjustment (usually over a thousand dollars per hour) to your advertised hourly rate, flight time minimums, or taxes in the proposal? With charter companies you can ask the same questions, is the quote all inclusive or are there hidden charges like crew overnight fees, hangar fees if the weather is bad at your destination and catering charges. With charter or fractional programs, what if you make last minute changes to your itinerary or cancel the flight? What if the air transportation provider is late or doesn’t show up at all, what is your recourse?

As stated above, if the deal being offered appears to be great (too good to be true) compared to your other options, you need to find out why.

It matters if you fly commercially, or privately, if you are a nervous, or fearful flyer, to some extent. Most flyers (if you are not a pilot or the pilot for the flight) have some misgivings each time they fly, but some of us just resign ourslves to the fact that you need to fly and have little control over the many factors that could impact the flight.

Some factors that cause concern regardless of flying commercially, or privately, are obvious like the weather, over water flights, mountainous terrain, airports in the mountains and small airports (usually short narrow landing strips). Some are not so obvious but due to past accidents and the subsequent news reports still cause some concern. Some not so obvious concerns include security, aircraft maintenance condition, pilot complacency (dependence on automation versus pilot skills), pilot training and experience and pilot fatigue.

Outside influences such as hijacking, terrorist activities and the growing incidents of lasers pointed at cockpits are also thought about prior to flight by some. In private aviation hijacking and terrorist activities are unlikely but the threat from laser light (accidental or on purpose) is growing in the US and in Europe. After 9/11 and other previous horrible events (Lockerbie Scotland) commercial travelers were on edge and the recent “disappearance” of the Malaysian airliner has done little to quell those fears.

So how do you overcome your fears and what can you do? If you fly commercially there is little you can do to change a flight plan, the point of origin of the flight and the destination, checking the experience and training of the crews or the quality of the aircraft maintenance. These are all controlled by the airline. US airlines have a very enviable safety history; however you are still at their mercy when it comes to security check in, crowded aircraft and the unavoidable delays and cancellations. If you fly privately, either on your own aircraft, through a fractional program or by charter, it is a different story.

If you own or co-own the aircraft then you have firsthand knowledge of the crews experience and training and the maintenance status of the aircraft. In addition, you pick departure and arrival location, times for the flight, who you fly with and most importantly you have the ability to terminate or not start a flight if there are any factors that bother you. If you participate in a fractional program you have the comfort factor (if your provider is one of the larger ones) that pilots are highly skilled and routinely trained, the aircraft is maintained as it should be (with a large staff overseeing such maintenance) and you have the ability to cancel or terminate the flight if you have a weather or other concern, however, you might get charged for the cancelled flight. With most charter operators they can provide you with their past histories and audit reports from independent aviation professionals and, as with fractional programs, you have the ability to cancel or delay flights for any reason but once again you may be charged for any itinerary changes or cancelations.

So what should you do? Do your homework on the method of air transportation you use and if using commercial stay vigilant. If you have your own aircraft make sure your crew knows your preferences and if you fly fractional or charter these companies usually build a profile on your likes and dislikes, make sure the profile is accurate.

Laser pointers have been commercially available since the 1980s and are seen everywhere from boardrooms, classrooms, in tools, cat and dog toys and even in gas stations as novelties. So why would the FBI offer a $10,000 reward to anyone that helps them to apprehend and convict someone pointing one of these seemingly harmless devices at an aircraft?

Most laser pointers available to the public are pretty harmless if used as they are intended to be and care is made not to shine them in someone’s eyes from close up. However, the danger to aircraft operations comes from the strong concentrated light they emit, the spread of this light at distances and the potential to distract, startle, cause flash blindness and the concern of injury (but at distances the risk of injury is low, at least from the laser beam). Currently there are no commercially available lasers that can physically damage an aircraft and it is unknown and doubtful that there are military lasers that could.

When using a laser outside at night it appears the beam ends at a relatively short distance from the user but that is incorrect and the beam spreads at longer distance like an ordinary flash light. At one half of a mile the beam from a handheld laser spreads to approximately the size of a doorway. When the beam spreads it has the potential to reflect from aircraft windscreens similar to when you are driving at night and an oncoming car does not dim their lights. Aircraft cockpits are kept in low light and the brightness of a laser beam can temporarily blind the crew, not a good thing when flying straight and level but extremely dangerous during the takeoff or landing phase of flight.

Lasers used in laser shows are 6 watts and green in color (green is the preferred color since that color can be seen more easily by the human eye than other colors and are less expensive to manufacture). Even though the light spreads at distances a laser show style laser can reach over 368,000 feet (70 miles) and at that distance the main danger is distraction. At lesser distances the dangers increase, eye hazard at 1,700 feet, flash blindness at 8,700 feet (1.5 miles) and glare at 36,800 feet (7 miles).

Commercial hand held lasers are usually about 5 mW and green in color but even at this lower wattage eye hazard could occur at 52 feet, flash blindness up to 262 feet, glare up to 1,171 feet and distraction up to 11,712 feet.

As mentioned above, this issue is being taken seriously as incidents continue to increase. In 2013 there were 3,960 (average 11 per day) reported instances in the US (up from 1,416 in 2009) and over 4,266 (average 12 per day) in Europe. If you are caught and convicted you could face fines and possibly jail time. A man in California was sentenced to 30 months in jail for pointing a laser at an aircraft and just last week another California man was sentenced to 14 years in prison for pointing a laser at a police helicopter. The second man’s girlfriend was also involved in the incident and is facing a $250,000 fine and 5 years in prision.

This is the third in a series of blog posts by David Beach, former Senior VP of Contracts at NetJets, on what questions you need to have answered before signing a management services agreement on a private jet.

Fractional Programs, Know the Terms & Conditions, Part 3

As stated in my last blog, a common facet to all fractional programs is the aircraft management services agreement. As this is, in my opinion, the most important of the numerous agreements that make up the contract package for program providers, it should be reviewed carefully and the terms and conditions clearly understood.

Maintenance

Who performs the maintenance and to what standards? Is the cost of maintenance covered by your monthly or hourly fees? Do you have exposure for modifications, refurbishment and/or Federal Aviation Administration (FAA) directives and/or manufacturers’ service bulletins and alerts? Do you have access to the maintenance records for your aircraft?

Flight Time Costs

Are flight time charges billed at actual flight time or estimated? Is there a per-flight or per-day minimum? How is taxi time accounted for and billed? What happens if your trip is interrupted by mechanical problems or regulatory requirements such as customs stops? Does the provider bill you for the additional landing and take-off, and does the per-flight minimum apply? How is the fuel consumed for your flights billed? Is it rolled into the hourly rate, and how is the cost of fuel calculated (providers’ actual or published average fuel rates)? How does the hourly fee escalate over the term of the agreement, and are there increases along the way as the aircraft ages and as the cost to maintain it increases? In addition to how your flight time is billed, you should know how your allotted hours (annual hours and contract term hours) are calculated and what the impact of under- or over-flying is and what happens if you trade to a smaller or larger aircraft. If you fly outside of the provider’s service area, is there a ferry fee, and does that impact your allotted flight hours?

Notice

In all programs there are notice periods for flight reservations. Does it vary by aircraft type, share size, area of travel and day of travel (peak or busy day versus non-busy day)? If you provide the required notice, does the provider guarantee to cover your flight? Does the provider have the ability to accelerate or delay your requested departure time depending on when notice is given or the level of demand for the departure day?

Customer Service

Most providers have a fairly large staff of customer service representatives. Do they assign an individual or team to your account or do you just get whoever picks up the phone? Will the provider’s customer service staff assist with flight-related services such as car rental, hotel reservations or shipping of excess baggage – and is there a charge for these extra services?

These are a few more of the areas you need to know about but there are more to come.

Sentient Jet, based in Braintree, MA, is a charter broker, meaning that they do not own their fleet; third-party charter operators supply the pilots and aircraft that Sentient offers. Sentient Jet is a 13-year-old company founded in 1999, and it is owned by Directional Aviation Capital. Directional Aviation owns various aviation enterprises nationwide, including Flight Options - a fractional aircraft program considered the number 3 program in North America.

Either of the Select or Preferred for Light or Mid provides the card holder with options to upgrade to super-mid and large cabin aircraft at preset prices on a trip-by-trip basis, but some restrictions apply. Upgrading does not impact the number of hours available for the card but does deplete the amount prepaid faster and consequently does reduce the hours available unless additional amounts are paid. The per hour rates for either card option are locked in for a twelve-month period after Sentient’s receipt of the initial card payment and signed contract. Flight time minimums are 1 hour for the light and mid cabin aircraft and 2 hours for the super-mid and heavy cabin aircraft. These minimums are after Sentient’s mandatory .2-hour addition per segment flown.

The main differences between the card programs are the size and age of the aircraft. The Preferred cards guarantee aircraft that were manufactured no earlier than 2000, and the Select programs offer aircraft manufactured in 1999 or earlier. Then you have the choice of light or mid-size cabin aircraft. Light Select options include aircraft manufactured by Cessna, Learjet and Hawker Beechcraft, featuring the venerable workhorses Cessna Citation V and V Ultra models. The Light Preferred aircraft consist of the same manufacturers, but cover newer variants. When you move to the mid-size cabin aircraft, the Select group adds Israel Aircraft Industries (IAI) to the aforementioned manufacturers, and the Preferred group adds Gulfstream. On the charter side, aircraft from turbo props to heavy from many manufacturers are available.

All of the services Sentient Jet offers are available 24/7/365 with worldwide coverage, and they can be reached either by phone or electronically. In addition, Sentient has established a comprehensive and unique 9-Point Safety Program developed by some of the most senior aviation experts in the world. In an industry that demands high standards, this 9-Point Safety Program monitors and mandates both internal Sentient activities as well as those of the operators participating in the charter and card programs.

As with other aviation service providers, Sentient offers their customers ground transportation (if needed), special catering, and benefits from partners such as world-class resorts, hotels, sports organizations, special events and more.

Magellan Jets is a privately held company based in Quincy, Massachusetts, and provides charter broker services. Magellan Jets is a 5-year-old company founded in 2008 by Joshua Hebert, Anthony Tivnan, and Greg Belezerian. Tom Harrison, President of DAS (an Omincom company), serves as Chairman of the Board. In 2012, Magellan Jets acquired SkyBridge Private Air, a premier charter broker which expands their presence on the west coast. They have quickly gained market share and the respect and confidence of the charter user community as well as charter provider companies.

Magellan Jets offers jet card programs as well as On-Demand charter. Their private jet cards include a 10-hour jet card and 25-hour jet cards (11 categories to choose from), as well as their Voyager Membership Program. On-Demand charter is self-explanatory but offers unique pricing options for one-way or round trip flights. The card programs vary from a debit card format with access to numerous aircraft types, to a specific aircraft type at preset rate and flight hours. These different programs offer air travel options that include helicopters, turbo props, light, mid, super mid and large business jet aircraft and air ambulance services along with 24/7 worldwide concierge service. The average age of the fleet network is usually 7 years old or less.

Magellan Jets uses Wyvern and ARG/US (Aviation Research Group/United States), the world leaders in aviation safety research, as their independent, third party evaluators to verify compliance of all charter flights to ensure passenger safety. Magellan Jets verifies the air charter safety information from flight history of the aircraft operator and related insurance policies. Magellan Jets has exclusive access to the records and audits of every aircraft and flight crew, and Magellan Jets demands the highest standard of safety for each flight. This is all closely monitored by their Flight Support and Compliance, which consist of pilots.

In addition to being meticulous in regards to the safety of all of the operators’ aircraft, crews and maintenance, Magellan Jets offers their customers air ambulance service within air medical service, pet-friendly flights, ground transportation (if needed), and benefits from luxury partners such as Four Season’s Nevis, The W Hotel S. Beach, French Lick Golf Resort, Goldeneye, and Manhattan Motorcars, to name just a few.

NetJets, a wholly owned subsidiary of Berkshire Hathaway, is the oldest and largest fractional program in North America and Europe, with a joint venture in China. NetJets began in 1986, but dates back to the mid-1960s because of its ties to Executive Jet Aviation. With a North American fleet of 366 and a European fleet of 160, NetJets’s position as the largest fractional program would be hard to dispute.

The NetJets North American fleet is very diverse when compared to other programs, such as Cessna, Hawker, Gulfstream, Dassault, Embraer and Bombardier. The fleet includes light jets, mid-size jets, super mid-size jets, and large jets. (A more complete list of jets in the fleet is below.)

The programs offered are as follows:

Fractional purchase, with a minimum purchase of 50 hours (6.25% share). The fractional purchase can be financed in house by NetJets.

Each option's available aircraft types vary based on age, new entries to the fleet, and the relative demand for a specific type.

Fractional purchase (or finance) and fractional lease normally offer 5-year deals with predictable pricing with the option to terminate in 24, 30 or 36 months based on aircraft type. The only exceptions to the predictable pricing are a fluctuating fuel surcharge, which is based on NetJets's actual fuel costs for the applicable month, and - in the case of fractional purchase - an unknown residual value of the asset at termination. With fractional purchase, the client buys the asset at closing and then pays a monthly management fee, per-hour flight charge, and a fluctuating fuel surcharge. The fractional lease is very similar to the fractional purchase, but instead of paying the asset cost upfront, you pay a monthly lease fee.

The Marquis Jet Card offers 25-hour programs (1 year term), 50-hour programs (2 year term), and combo cards which are 25-hour cards split between two aircraft types of the buyer’s choice (1 year term). The 25- and 50-hour card terms can be extended for up to 3 years, but additional restrictions and charges apply during the second and third years. Also with the combo card, depending on aircraft selection, additional restrictions may apply on peak period days. With any of the card options, you pay a flat fee upfront and then each month you fly you pay an additional fuel surcharge based on the number of hours flown.

Cost-wise, the Marquis Jet Cards are the most expensive, followed by the lease program, with the fractional purchase/financed program pulling up as the least expensive. However, the final cost of the fractional purchase/lease program is hard to calculate upfront since a large portion of the cost is driven by market conditions and the value of the aircraft share at time of termination.

Options in Jet DebitCard, Leasing, & Fractional Ownership

Flexjet, a wholly owned subsidiary of Bombardier, is considered the number 2 fractional aircraft program in North America. The number 2 ranking is based on fleet size (69 aircraft) and average age of the fleet. Currently, Flexjet has the overall youngest fleet but four less aircraft than the closest competitor (considered the number 3 program) based on fleet size.

The Flexjet fleet, unlike most of the other programs, consists solely of Bombardier and Learjet (a wholly owned subsidiary of Bombardier) products. They have aircraft that will fit almost any business or pleasure flyer’s needs, including the Learjet 40 and 40XR (light), Learjet 45XR (super light), Learjet 60 and 60XR (midsize), Challenger 300 (super midsize) and Challenger 604 and 605 (large). Flexjet will soon be adding the Learjet 70 (light) and Learjet 85 (midsize). These new aircraft will be the latest in design technology and performance in the Learjet stable of offerings. While some competitors have in the past criticized Flexjet for only using Bombardier products, those same competitors are now buying Bombardier products for their own fleets.

Flexjet offers three main products and variants of those products: a jet (debit) card, a lease program and the traditional ownership program. Each of these options has its own pros and cons.

The jet (debit) card is just that: a debit card with a minimum initial deposit of $100,000, which becomes non-refundable only if the cardholder does not cancel it within 14 days of their first flight; any subsequent deposit is refundable. The jet (debit) card guarantees access to the whole Flexjet fleet (except for the Challenger 604 and 605 aircraft) at preset base hourly rates plus a variable fuel adjustment and federal excise tax, and it gives you the option to fly as little or as much as you need. The jet (debit) card offers the most flexibility but the highest costs.

The lease program is less expensive than the jet (debit) card but is locked into a specific aircraft type, a set number of hours per year, a monthly lease and management fee, a preset hourly charge (plus variable fuel adjustment and federal excise tax), and access to the rest of the fleet is on an “as available” basis at a preset interchange rate. The lease (which Flexjet calls the “walk away lease”) gives the lessee the option to terminate at any time with 90 days advance notice.

The least expensive option offered by Flexjet is the traditional ownership model; however, since it is an ownership arrangement, the residual value of the asset (aircraft share) at the end of the term will impact what your true cost per hour to fly will be. The fractional ownership option carries a 5 year term with an early out option - typically after 30 months - with a termination fee. The ownership option requires purchase of the share and – except for a monthly lease fee – locks into the same conditions as the lease program, such as a specific aircraft type, a set number of hours per year, and the same “as available” access to the rest of the fleet.